U.S. Minimum Wage, Unpaid Internships Damage Budgets

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The United States is home of the free, the brave, and the in-debt. We are a people and country swimming in the loathsome tide of I.O.U.s. It’s painful to self-correct or change a path that’s been forged by our predecessors. Workers are paid less than ever (when controlling for inflation) and students are practically forced to take internships that pay nothing. We’re lining our shelves with stuff and our pockets with receipts.

Nearly everyone in America recognizes that something needs to change. Our spending habits need to be curtailed. We must develop a critical-consumer mentality and protect ourselves from the threat of spending outside our budgets. That’s why I started this site – to engage an audience and self-reflect about the choices I make. But sometimes it feels like it’s fruitless in a system that’s stacked against those working tirelessly for a better life.

There’s a continuous drumbeat-like debate inside my head over the balance of personal and governmental responsibility. There are choices we can make that help alleviate debt, overcome student loans, and craft a better future. When we sign a loan, it’s an acceptance of the terms and conditions (whether you’ve read them or not). The burden of responsibility is clear, but the system seems to be stacked against us, too.

Most developed countries have a higher minimum wage than we do…The U.S., unsurprisingly, is on the bottom but it’s tied with Japan. (Source)

In comparison, Australia’s is $16.88. The words “unconscionable” and “immoral” flutter and flicker in my mind. How can we pay such unlivable wages? Even before taxes, you can’t live off of $7.25 an hour. Never mind budgeting, saving for retirement, giving to charity, and a wealth of good that’s talked about in the personal finance community. The cards feel stacked against those with less – they have an even larger hurdle to balance their spending.

In fact, McDonald’s came under close scrutiny from the popular media over it’s partnership with PracticalMoneySkills.com. The McD’s sponsored site offered budget tips and an outline for how to make the most of your income (You can download the “Budget Journal” here). The budgets left you with a plan to:

…save $100 a month to realize long term financial goals…the purchasing power of the minimum wage has been on a general downward path since 1968, when it stood at $1.60—the equivalent of $10.70 in May 2013 dollars.(Source)

A fallacy exists about minimum wage. It goes like this, “Minimum wage is a stepping stone to a better life. This is where people get their first jobs before college. You have to work your way up.” Ever heard it, said it, felt it? Maybe I can’t dissuade the belief in ~750 words, but I want to tell you that’s a myth. Here’s why:

The average age of a fast-food worker is almost 30 right now. (Source)

Simultaneously, the youngest, most financially unprepared age group, is accepting non-paid internships at alarming rates. These bastions for experience and career networking have turned into a previous generation taking advantage of youth. They’re not protected by legal authority, can be let go at will, and experience no direct financial gain from today’s non-paid internships. And yet, students and recent graduates continue to work for free.

Because of this, we’ll likely see a greater splitting of income groups – a caste. Lower and middle-income populations are placed under financial duress when accepting these future-oriented opportunities. Maybe they’ll unlock doors to careers that pay well and allow for budgets to flourish. But the risk may not be worth the reward. Regardless, at times, it feels like the system is stacked against the greater whole.

Even at the top – in the White House – interns are not paid. If, the White Whose pays their interns, the cost to taxpayers is estimated to be around $7 million dollars at a $9 per hour wage. Incredible and expensive, but a infinitesimal fraction of the country’s budget. Our most competent and motivated youth receive White House internships – it is a true honor. But what if you couldn’t accept it because you’d fall into greater debt or need to support a family?

We need a gut-check, America. The status quo is painful, disorganized, and stacked against the majority. The pejorative wages and non-paid internships undercut the fabric of opportunity and the livelihood of our American dream. Employers need to be encouraged systematically to raise their minimum wages, offer more financial incentives for internships, and bolster the bottom. In turn, individuals should react accordingly by saving more, planning for retirement, and taking responsibility of this gift.

What do you think the federal government should do about minimum wage? What’s been your experience with non-paid internships? Are they fair?

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Comments

I definitely don’t agree with unpaid internships. I don’t blame businesses for utilizing them though. If students think so little of themselves that they are willing to work for free, why would a business owner pay them?

Hmm… I’m not sure if I understand your comment correctly, but I don’t know that it’s a matter of students/youth not having respect for themselves. Obviously internships vary greatly across academic domains. If you’re in the computer sciences, you’ll likely have paid opportunities – unlike the humanities. But there’s been a steady rise in unpaid internships. I don’t think this is attributable to youth that don’t care. Largely, this may be from employers exploiting a system that allows them to get free labor.

It’s not that simple. It’s literally the ONLY way in for some careers. If you don’t take the unpaid internship, you don’t work in that industry. So then you look for something unrelated, or worse yet, not even needing college at all, or you knuckle under and work for free and hope to get a paying job.

What should you do if you’d like to hire someone but don’t feel that they will contribute at least $7.25/hour to your business.

Here’s a scenario: Let’s say you’re hiring a high school student for a summer job. You’ll have to spend some time training them and letting them get used to your workplace before they start contributing. You know they’ll only be working for a few months – once the school year starts, they’ll have to quit. You estimate that they’ll contribute about $3/hour over the course of their employment. The high school student (and their parents) agree with your assessment.

Do you pay them the minimum wage, despite the projected loss to your company? Do you hire them as an unpaid intern and hope that the experience they gain will pay for the time they spent? Do you not hire them at all?

You bring up an interesting hypothetical that I’m not quite sure how to answer. Minimum wage is currently set at $7.25 federally. If an employee won’t contribute enough to pay their own wage, you likely wouldn’t be in the market for new employees. Now, that being said, I’m sure you could farm your work to people in India or China. But that has some interesting moral implications for labor and protections.

I’m not sure I’m qualified to answer this business-oriented question, but you bring up a provocative point. I’d love to know what others think!